February 2015

02/25/2015

Once the basic documents are in place, they should be revisited periodically. If there is a major change in your circumstances- good or bad, your attorney should know.

How are those New Year’s Resolutions coming along for your finances and estate plan?

Fox News recently posted some tips in an article titled “Is it time for your legal checkup?”The article advises that a will is a great starting point, even if you’re young and healthy. Once we have children, another important part of estate planning is designating a guardian who will rear your children if something unforeseen happens. It’s also important to decide the ages at which your kids should inherit assets. You should discuss all of this with your estate planning attorney: allowing the trustee to have the discretion as to how, whether, and when to make distributions can protect immature or young beneficiaries. This will also keep these assets from counting against a young person’s college financial aid applications.

The Fox News article also counsels against online or DIY estate planning kits, as no two situations are identical. You can trust an attorney with information about your loved ones’ spending issues, troubled marriages, developmental disabilities, gambling and/or substance abuse problems so that he or she can work with you to create a strategy to protect everyone. A “fill in the blanks” document could not possibly protect our goofy relatives from each other! Come on, your brother-in-law Ed is no financial planner!

A Power of Attorney allows you to name an agent who can sign documents and transact business on your behalf, if you become mentally or physically incapacitated. It’s critical to customize the document based upon your relationship with the named agent. For example, young people may want to limit the agent’s authority to just paying bills, and older married people usually want to delegate full power to each other.

While you are at it, think about your health care advance directive. This allows you to designate an agent who has your permission to speak with your medical caregivers about your treatment decisions on your behalf if you are unable to speak for yourself.

Once the basic estate plan is in place, you should revisit it periodically with your attorney. If there’s a big change in your circumstances—either good or bad—your estate planning attorney should be made aware.

02/24/2015

How big a problem is impossible to say, because hard data is scarce. “The reality is that we don’t even have national data on the scope of the problem,” Sen. Claire McCaskill (D-Mo.), said at the hearing.

It has been found that much of the financial abuse involving seniors goes unreported. According to a New York State Elder Abuse Prevalence Study, only one in 44 cases is reported. And knowing that makes for a real problem when reviewing some of the data we do have.

It’s a problem that Kathleen Quinn, Executive Director of the National Adult Protective Services Association, called “rampant, largely invisible, expensive and lethal” at a recent Senate Special Committee on Aging hearing on the subject. In fact, as reported in a recent Forbes article titled “Why Elder Financial Abuse Is Such A Slippery Crime,” a new study asserts that financial elder abuse costs $36.5 billion annually—more than 12 times the figures that MetLife has published in the past few years.

Each type of fraud has a different age spectrum. Investment scams peak around age 65, and work-from-home scams, dating scams, weight loss, and most Internet scams are more common at a bit younger age. Finally, theft by family members peaks much later.

While attempting to determine the extent of financial elder abuse is difficult, curbing it is even tougher. Elder abuse frequently will involve overlapping types of crimes, such as neglect and physical and sexual assault. Further, many caregivers, family members, financial services employees, and police officers simply are not trained in preventing, detecting or dealing with financial exploitation of the elderly. Add to this a lack of coordination between agencies and professionals, and you can see the scope of the issue.

Fortunately, our government is getting more involved. The 2015 White House Conference on Aging has made “elder justice” one of its four tracks. Also, a government working group known as the Elder Justice Coordinating Council, the Department of Justice, HHS’s Administration for Community Living and the Consumer Financial Protection Bureau’s Office for Older Americans have teamed up to gather data and create materials for professionals and family members. The Securities and Exchange Commission is also getting more involved. Its first Investor Advocate says one of his agency’s priorities is to give financial service professionals more effective tools to protect clients whenever an adviser or registered representative suspects financial or other abuse of a vulnerable client.

02/23/2015

In continuation of the series on estate and life planning, this column focuses on how Medicaid factors into financial planning for long-term care.

Seniors need to have a plan in place for long-term care, should they need care assistance in the future. A recent article in The Victoria (TX) Advocate titled “How does Medicaid factor into financial planning?” recommends that seniors need a strategy to pay for the costs of long-term care. In some instances, however, some individuals may have to rely on Medicaid if they don't have enough income to purchase long-term care insurance, the assets to pay for care themselves, or they are uninsurable.

Medicaid planning was often thought of as a viable tool for long-term planning. However, estate planning attorneys are now rethinking this strategy. Medicaid planning—which was, in essence, planning to make asset transfers, used to be the primary tool used by seniors considering long-term care costs. However, law changes and the advent of new financial products and plans will work better, they say. Medicaid "planning" is actually a misnomer as most seniors don’t plan to go on Medicaid, but rather experience an urgent care need, and there aren’t any other options. A better alternative is to obtain a long-term care insurance policy.

To qualify for Medicaid, a senior must be at what the government deems poverty level: less than $2,000 in countable assets (countable assets doesn’t include one's personal residence and this threshold varies by state) and roughly $2,000 or less in monthly income. Even if a senior is considered well off when he or she retires, medical and long-term care costs can decrease their assets to the poverty level, which means Medicaid would be an option at that point.

Some seniors will purposely transfer or retitle assets to qualify for Medicaid. This can be risky, the original article advises. There are other methods of spending down assets which can be more beneficial to the senior—like using cash assets to make substantial home improvements and repairs, adding safety features in the home should the senior become wheelchair bound.

Another risk in depending on Medicaid for long-term care is that federal law requires states to look for recovery of Medicaid benefits. The state will put in a claim against any assets that pass through probate upon the death of the recipient. This will include assets not counted during eligibility, such as the senior’s home.

Because estate and lifetime planning can be overwhelming and wrought with pitfalls, the article advises seniors to enlist the help of an estate planning attorney and, more particularly, an elder law attorney to evaluate all options available.

02/20/2015

"I think it's great because it's not overreaching and it's not underreaching. It just kind of fits that one spot where we didn't have something: How does somebody with a disability put some money aside to do something? To basically be living like their peers," said Lori Guzman, an attorney in Apple Valley who works with families who have individuals with disabilities.

According to a recent article in the Pioneer Press, titled “Minnesota law would help parents of children with disabilities save for future,” right now people with disabilities can lose eligibility for public benefits once they reach $2,000 in savings. With an ABLE account, contributions of up to $14,000 per year are allowed under current rules, and the account could grow to $100,000 before Social Security Supplemental Security Income would be suspended.

These "ABLE" accounts—which stands for “Achieving a Better Life Experience”—allow parents to sock away money for blind or disabled children in the same kind of tax-advantaged 529 account they now can set up to pay for higher education for their college-bound kids.

The original article points out that these contributions themselves are not tax-deductible. However, your earnings accumulate tax-deferred, and distributions are tax-exempt if they are used for approved purposes like housing, transportation, education, health care, support services, and training. To qualify for an ABLE account, a person must have a significant disability with an onset before age 26.

An ABLE account shouldn’t replace other long-term estate planning, and families need to also look into trusts as well because the ABLE account is capped. When you die, you can't just dump assets into an ABLE account. The ABLE accounts do permit parents to level out how they treat their disabled and nondisabled kids in terms of annual gifts for estate purposes.

In the first bill signed into law this session, Minnesota lawmakers and Governor Mark Dayton included the federal ABLE act. This act was signed by President Obama last year and was added to the state tax code, but lawmakers have to pass a bill to set up ABLE accounts in Minnesota. A Senate bill to do that gets its first hearing this month.

02/19/2015

Blended families without a proper estate plan for wealth transfer could run into additional obstacles not observed by traditional families.

For example, state inheritance rules, intestate laws, and conflicts in beneficiary designations could be inconsistent with the will. In addition, a disinheritance of new family members without the knowledge of the entire family can cause emotional friction between the surviving family members.

There have been some laws enacted that have changed how beneficiary designations are handled, so make sure your estate plan is in sync with your retirement accounts. Do this because those beneficiary designations generally supersede what is directed in your will.

You can learn more in The (Lakeland FL) Ledger article titled “Tips for Successful Wealth Transfer to Your Survivors.” The article says having a trust as a beneficiary of an account is a good way to control wealth transfer. It allows the assets to flow through a trustee rather than an account custodian. The discretionary distribution of assets is a method of controlling "from the grave" how your money is to be given to certain family members who might have issues dealing with their finances. It’s what’s known as a "spendthrift provision."

You can accomplish secure wealth transfer and estate planning by working with an experienced estate planning attorney. Protect your wealth and the relationship with your heirs by carefully creating an estate plan and discussing that plan with your family.

02/18/2015

There’s barely a person over the age of 40 or so who does not come with a family squabble about, well, things following the death of a well-loved parent, grandparent, or family friend. Even Robin Williams, who planned his estate well, could not avoid a family feud after his passing.

Sadly, it’s true. In just four months after the comedian’s death, litigation has begun between Williams’ three children and his third wife. Even a well-thought plan can be challenged by those you leave behind.

The recent slate.com article, titled “Robin Williams’ Family Is Like Yours” says that a good talk with the family is the best way to avoid post-death struggles over your estate after you pass away. Sit down with your loved ones and tell them about your will, and how you’d like to see your belongings divided up. Convey some life values while you’re at it. You can even ask for their input.

After the death of a well-loved parent, family squabbles can erupt over vacation homes that have been in the family for generations—or things with much less value. These battles are often over items that aren’t financially worth an hour of the most inexpensive lawyer’s time!

As for Robin Williams’ possessions, the lawyers for Schneider Williams referred to the items as “knickknacks,” while, in their counter-filing, Williams’ children claim these possessions were “carefully amassed.” They say that their stepmother of less than three years had the possessions quickly appraised, and was motivated by greed.

The original article explains that even worthless possessions can become proxies for personal battles that are, sadly, never resolved. Second and third marriages—like those of Robin Williams—make things more complicated, but any family can have such headaches, too.

Speak with an experienced estate planning attorney and get your plan in order. Then talk to your heirs so they know what to expect and are ready to deal with it.